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Legal framework

Legislation

What is the primary legislation governing insolvency and restructuring proceedings in your jurisdiction?

The Bankruptcy Law – enacted with Decree-Law 267/1942 (as amended) – governs the following insolvency procedures:

  • bankruptcy liquidation;
  • judicial compositions with creditors;
  • debt restructuring agreements;
  • restructuring plans; and
  • administrative liquidation.

Decree-Law 270/1999 and Law 39/2004 (converting Decree-Law 347/2003) govern the extraordinary administration procedure.

Law 3/2012 governs the insolvency liquidation and reorganisation procedures of debtors (small businesses and consumers) not eligible for the foregoing procedures.

Regulatory climate

On an international spectrum, is your jurisdiction more creditor or debtor friendly?

Liquidation procedures are more creditor friendly, while reorganisation procedures are more debtor-friendly.

Sector-specific regimes

Do any special regimes apply to corporate insolvencies in specific sectors (eg, insurance, pension funds)?

The extraordinary administration procedure is a general procedure applicable to large businesses, whereby a few provisions are tailored for insolvencies in the public services sector.

The administrative liquidation procedure applies to companies in certain regulated sectors, such as banking and insurance. Alternatively, resolution procedures also apply under Decree-Laws 180/2015 and 181/2015, which implemented the EU Bank Recovery and Resolution Directive (2014/59) in Italy.

Reform

Are any reforms to the legal framework envisaged?

A government proposal is pending in Parliament which seeks to establish a comprehensive reform of all insolvency procedures; however, it is unlikely that this proposal will be enacted during this term. 

Director and parent company liability

Liability

Under what circumstances can a director or parent company be held liable for a company’s insolvency?

Directors can be held liable for damages resulting from violation of their duties – in particular, their duty to:

  • act with care;
  • preserve and maximise the value of the company’s assets once a risk of insolvency emerges or share capital is lost; and
  • refrain from acting in a conflict of interest.

Parent companies can be held liable for damages resulting from abusive direction and coordination activity over a subsidiary.

Defences

What defences are available to a liable director or parent company?

Directors can invoke the business judgement rule and object by claiming that the burden of proof is on the receiver to show precisely what conduct the director is being blamed for and the specific causal link of that conduct to the ensuing damage to the company. In particular, non-executive directors can object on the basis that they are entitled to act simply based on reliable information made available to them during board meetings.

As far as abusive direction and coordination causes of action are concerned, a parent company can object by stating that the damages should be assessed in light of the overall direction and coordination activity; therefore, so-called ‘compensatory advantages’ to the subsidiary should be considered. The burden of proof is on the receiver to show what abusive conduct has been performed in the interest of the parent company or a third party and the causal link to the ensuing damage to the subsidiary.

Due diligence

What due diligence should be conducted to limit liability?

N/A.

Position of creditors

Forms of security

What are the main forms of security over moveable and immoveable property and how are they given legal effect?

  • Mortgages – established over real estate and movable assets registered with public records (eg, cars and boats). A mortgage is given legal effect with the registration in the relevant register.
  • Patto marciano’ – conditional sale of real estate provided as a clause in a loan agreement, whereby the parties provide that title to the property will be transferred to the creditor if the debtor is in breach of contract, on certain conditions.
  • Pledge – established over movable assets and receivables. A pledge is given legal effect through a written agreement, the delivery of the pledged assets or notification to the debtor or receipt of its acceptance. To be enforceable with regard to an insolvency procedure, the creditor must also provide irrefutable evidence that the agreement was made before the insolvency procedure.
  • Floating charge on movable assets – special kind of pledge (for claims against debtors exercising business activity) which enables the debtor to use and dispose of the goods within its business activity.
  • Preference – a preference is provided by law based on the grounds for the claim (eg, employment, professional services or taxes). Preferences can be general (ie, they can provide a lien on the whole of movable or immovable assets of the debtor) or special (ie, they can provide a lien on specific assets or categories of assets).

Ranking of creditors

How are creditors’ claims ranked in insolvency proceedings?

Super-priority creditors Super-priority creditors are entitled to be paid in full before any other creditor. These claims arise in general when the debt is undertaken or assumed by the bankruptcy receiver (eg, when the receiver decides to continue performing a contract or costs of the procedure) or arise in connection with a restructuring procedure which happened to evolve into bankruptcy liquidation.

Secured creditors Secured creditors are entitled to be paid with priority only out of the proceeds from the sale of the assets on which they have a mortgage, pledge or preference.

Unsecured creditors Unsecured creditors rank equally and share the residual cash after super-priority and secured creditors.

Subordinated creditors  Subordinate credits are entitled to be paid only after all other creditors have been paid in full; notably, these include shareholders for loans to the company.

Can this ranking be amended in any way?

Ranking of creditors cannot be modified by agreement between the parties. However, a single creditor can waive its right to preference or be treated as a subordinated creditor to all or specific creditors.

Foreign creditors

What is the status of foreign creditors in filing claims?

Foreign creditors are treated as domestic creditors. The only issue that may arise relates to recognition of a security or preference provided for by a foreign law. According to Article 4(2)(i) of EU Regulation 1346/2000, Italian law governs the “ranking of claims”, and Italian courts tend to recognise only priorities which can be likened to those provided by Italian law (at least in one case, the courts have recognised the right of a secured creditor to interest at the rate of the foreign law applicable to the claim).

Unsecured creditors

Are any special remedies available to unsecured creditors?

N/A.

Debt recovery

By what legal means can creditors recover unpaid debts (other than through insolvency proceedings)?

Creditors can enforce their claims:

  • against third-party guarantors or joint debtors; and
  • by seizing assets which may be relinquished by the bankruptcy receiver.

A special regime applies in favour of banks and financial institutions, allowing enforcement of the guarantee while the debtor undergoes bankruptcy liquidation (but not during compositions with creditors) with respect to:

  • first-degree mortgages assisting medium and long-term loans; and
  • pledges on financial instruments such as notes, debentures, receivables and bank accounts, under certain circumstances.

Is trade credit insurance commonly purchased in your jurisdiction?

Yes.

Liquidation procedures

Eligibility

What are the eligibility criteria for initiating liquidation procedures? Are any entities explicitly barred from initiating such procedures?

Debtors conducting a business activity (either individuals, partnerships or companies) are subject to bankruptcy liquidation if they exceed any of the following thresholds in at least one of the three previous years:

  • balance-sheet assets above €300,000;
  • turnover above €200,000; or
  • debts above €500,000.

Further, the court may reject a petition if there is no evidence that the debts due and payable amount to at least €30,000.

Debtors not reaching these thresholds are eligible on a voluntary basis to the simplified liquidation procedure governed by Law 3/2012 as small businesses.

Debtors exceeding further dimensional thresholds (at least 200 employees for at least one year and debts amounting to less than two-thirds of both total balance sheet assets and turnover of the last financial period) are eligible for extraordinary administration as large businesses.

Certain business organisations are exempted from bankruptcy liquidation due to the nature of their activity or the entity itself (eg, farmers and related businesses and state-run businesses).

Procedures

What are the primary procedures used to liquidate an insolvent company in your jurisdiction and what are the key features and requirements of each? Are there any structural or regulatory differences between voluntary liquidation and compulsory liquidation?

A debtor conducting a business activity is considered insolvent when it cannot meet its own obligations as they fall due. When a company has ceased to trade and entered into voluntary liquidation, it is considered insolvent if it cannot pay all creditors in full.

In an orderly voluntary liquidation, a liquidator is appointed by the shareholders and, if the company’s assets are not forecasted to be sufficient to pay all creditors in full, the liquidator must file for bankruptcy liquidation or a restructuring procedure.

None of the effects of bankruptcy liquidation occur in a voluntary liquidation: the liquidator remains in full control and there is no court intervention or supervision, as the company is not insolvent.

Bankruptcy liquidation A debtor may be declared bankrupt through its own motion or a petition filed by any creditor or the public prosecutor.

Bankruptcy is the standard insolvency liquidation procedure and is aimed at selling or realising all of the assets of the debtor and paying any creditors.

Extraordinary administration In this proceeding, the receiver is appointed by the government, which has pervasive powers to determine how the procedure actually unfolds.

The main difference from bankruptcy liquidation is that extraordinary administration is specifically aimed at preserving the business, which normally happens through a sale of the business as a going concern. If this is not possible, the court will convert the procedure into bankruptcy liquidation.

The business is run by the receiver until the sale can take place.

Creditors are paid with the proceeds of the sale of the business and other company assets.

Administrative liquidation Administrative liquidation is a special liquidation procedure in which the entity is liquidated under the control of the relevant administrative authority that oversees the industry in which the entity is active (eg, the Bank of Italy for banks and financial institutions and the Insurance Supervisory Authority for insurers).

The procedure may be triggered not only by insolvency, but also on other grounds (eg, serious irregularities or violations of laws or regulations).

Simplified liquidation of small businesses under Law 3/2012 This procedure cannot be triggered by creditors or the public prosecutor. Its main features are similar to bankruptcy liquidation, but there are no avoiding powers of the receiver or rules on pending contracts.

Reorganisation procedures An insolvent company may be liquidated through a reorganisation procedure: both compositions with creditors and debt restructuring agreements can be used for this purpose.

How are liquidation procedures formally approved?

Insolvency liquidation procedures are confirmed by court judgment, except for:

  • administrative liquidations, which are started by the relevant administrative authority; and
  • extraordinary administration procedures under the special provisions of Law 39/2004 (the so-called ‘Marzano Law’), which are started by the government on application by the company.

Judgments can be challenged before the Court of Appeals and, on final appeal, by the Court of Cassation.

What effects do liquidation procedures have on existing contracts?

In bankruptcy, as a rule, administrative liquidation and extraordinary administration procedures contracts remain on hold until the receiver chooses to continue or terminate them, with the authorisation of the creditors’ committee.

Certain contracts are subject to specific rules, whereby some are automatically terminated by operation of law and others continue in force.

If a contract continues within the procedure, the receiver must fully perform the relevant obligations. If the contract is terminated by the receiver, the other party is not entitled to compensation, except in case of leases of property or business units.

What is the typical timeframe for completion of liquidation procedures?

The average duration of a bankruptcy liquidation procedure is around seven years. Recent amendments are aimed at shortening the duration of the procedure, but the effects of this remain to be seen.

In extraordinary administration, the sale of the business must be completed within a year (the term can be delayed for another year).

Role of liquidator

How is the liquidator appointed and what is the extent of his or her powers and responsibilities?

In bankruptcy liquidation, the receiver is in charge of preserving and selling the assets of the debtor and of paying the creditors. The receiver must prepare a liquidation plan. This plan must be approved by the creditors’ committee, as do any acts outside of the ordinary administration and those regarding the termination of pending contracts. The receiver is also a party in the proof of debt phase.

In extraordinary administration, the receiver is appointed by the government and must act according to the plan approved by the latter.

In administrative liquidation, the receiver is appointed by the administrative authority and must act according to the directions of the latter.

Court involvement

What is the extent of the court’s involvement in liquidation procedures?

In bankruptcy liquidation procedures, the court:

  • opens and closes the procedure;
  • appoints and replaces the judge and receiver;
  • decides on objections to acts taken by the judge; and
  • rules on appeals in the proof of debt phase, distribution to creditors phase and on the discharge of the debtor.

The judge in charge of the procedure:

  • appoints the creditors’ committee;
  • resolves any conflicts regarding acts taken by the receiver or the creditors’ committee; and
  • decides on the proof of debt filings.

In extraordinary administration, the court opens and closes the procedure and decides on appeals in the proof of debt phase. The judge decides on the proof of debt filings.

In administrative liquidation procedures, the court:

  • declares the state of insolvency of the debtor (triggering avoiding powers of the receiver);
  • decides on appeals against the list of creditors prepared by the receiver; and
  • rules on appeals against the final balance sheet of the liquidation.

Creditor involvement

What is the extent of creditors’ involvement in liquidation procedures and what actions are they prohibited from taking against the insolvent company in the course of the proceedings?

In bankruptcy liquidation, the creditors’ committee:

  • approves the liquidation plan proposed by the receiver;
  • authorises the lease of business and termination of pending contracts; and
  • approves any act taken by the receiver exceeding ordinary administration.

Individual creditors have a limited role within the procedure.

In extraordinary administration and administrative liquidation procedures, the role of the creditors’ committee is limited to consultation.

Director and shareholder involvement

What is the extent of directors’ and shareholders’ involvement in liquidation procedures?

In bankruptcy liquidation, extraordinary administration and administrative liquidation procedures, directors and shareholders of a bankrupt company continue to hold their office, but the effects of their actions are limited to powers of the debtor within the procedure (ie, they can challenge only certain acts taken by the receiver, the creditors’ committee and the judge).

Restructuring procedures

Eligibility

What are the eligibility criteria for initiating restructuring procedures? Are any entities explicitly barred from initiating such procedures?

Debtors conducting a business activity eligible for bankruptcy liquidation, extraordinary administration and administrative liquidation procedures are also eligible for restructuring procedures, with the notable exception of banks.

Debtors eligible for the simplified liquidation procedure under Law 3/2012 (small businesses and consumers) are eligible for the simplified reorganisation procedures governed by the same law.

Procedures

What are the primary formal restructuring procedures available in your jurisdiction and what are the key features and requirements of each?

Debt restructuring agreements under Article 182bis of Bankruptcy Law

This is a court-confirmed agreement with creditors representing at least 60% of total debts. It is not binding on other creditors, unless certain conditions for cramdown of individual financial creditors are met.

Compositions with creditors  This is an arrangement proposed to creditors which, based on a feasible restructuring plan validated by an expert, allows debts to be restructured or discharged in any form. Creditors may be divided into different classes, with different treatment.

The proposal is approved by the required majority of creditors and is then confirmed by the court.

All debts existing at the date of filing are discharged. Debts and costs incurred during the procedure must be paid in full under the proposal.

Restructuring arrangement under Law 3/2012 This is an arrangement similar to a composition with creditors which a debtor (a small business or consumer) may propose to the creditors.

How are restructuring plans formally approved?

Debt restructuring agreements

The agreement must be confirmed by the court, which will confirm that the plan is feasible and ensure the payment of creditors in full who are not parties to the agreement, based on a report by an independent expert.

The court may force individual creditors to accept the agreement, if conditions for cramdown are met.

Compositions with creditors Only the unsecured creditors (including secured creditors for the portion of their credit which is not fully satisfied under the plan) vote on the proposal.

The proposal is approved if it is voted by a simple majority of creditors and (if that is the case) also by a majority of classes). The court then confirms the proposal.

What effects do restructuring procedures have on existing contracts?

Debt restructuring agreements

Existing contracts are not affected.

Compositions with creditors Existing contracts can be affected in two ways:

  • Contracts can be suspended or terminated by the debtor with court authorisation (excluding employment contracts and certain lease agreements). The other party can be awarded compensation for damages, which will be treated as a composition claim.
  • If certain conditions are met, the other party is barred from enforcing any termination clauses.

What is the typical timeframe for completion of restructuring procedures?

Debt restructuring agreements

Confirmation is normally issued in a few months.

Compositions with creditors In general, the entire procedure lasts between eight and 16 months.

Court involvement

What is the extent of the court’s involvement in restructuring procedures?

Debt restructuring agreement

The court exclusively confirms such agreements.

Compositions with creditors The debtor may make a pre-filing in order to obtain a stay of creditors’ enforcement actions and continue to trade under court supervision. During the pre-filing phase, the court can authorise new loans and any acts exceeding the ordinary management.

The court opens the procedure once the proposal and required documentation are filed. Once the procedure has been opened, the court:

  • appoints a judge to be in charge of the procedure and (if not already appointed after a pre-filing) a judicial commissioner (a professional) to review the proposal and submit a report to the creditors; and
  • fixes a hearing before the judge, during which the proposal will be voted on by the creditors.

If the proposal is approved, the court will set a hearing for the proceeding in order to confirm the proposal. With the confirmation order, the court may set any directions for the implementation phase of the proposal.

Creditor involvement

What is the extent of creditors’ involvement in restructuring procedures and what actions are they prohibited from taking against the company in the course of the proceedings?

Debt restructuring agreements

This is an agreement entered into voluntarily by the parties. Creditors may oppose confirmation by the court.

Compositions with creditors The creditors are involved in voting on the proposal and may oppose confirmation by the court. There is no creditors’ committee.

Creditors jointly representing at least 10% of total claims may also file an alternative proposal, unless the debtor’s proposal provides payment of at least 30% or 40% of unsecured claims, depending on the circumstances.

Under what conditions may dissenting creditors be crammed down?

Debt restructuring agreements

Only individual lenders can be crammed down if certain conditions are met, including where:

  • the debtor’s indebtedness is mainly to lenders;
  • dissenting lenders are included in one or more classes of lenders, having accepted the agreement by a three-quarters ratio;
  • dissenting lenders were allowed to participate in good faith in negotiations and received comprehensive information; and
  • dissenting lenders are satisfied no less favourably than in a composition with creditors or liquidation.

Minority dissenting lenders can also be subject to cramdown under similar conditions with respect to standstill agreements entered into with other lenders, pending negotiations to reach a debt restructuring agreement.

Compositions with creditors Creditors are bound by the proposal approved by the required majority of creditors once it is confirmed by the court.

Dissenting creditors may oppose confirmation by objecting that:

  • the legal conditions for confirmation are not met; or
  • the proposal is not beneficial to the opposing creditor, as it would receive a higher return in bankruptcy liquidation; opposition on these grounds may be raised only by:
    • a creditor of a dissenting class; or
    • creditors representing at least 20% of the total value of voting claims.

Director and shareholder involvement

What is the extent of directors’ and shareholders’ involvement in restructuring procedures?

Debt restructuring agreements

No resolution by the directors or shareholders is formally required.

Compositions with creditors The filing and proposal must be approved by a formal resolution of the directors, whose minutes must be filed with the companies’ register.

The debtor and directors remain vested with management in the ordinary course of business.

After filing (or pre-filing), shareholders are exempted from recapitalising the company and declaring voluntary liquidation if the share capital is lost.

Informal work-outs

Are informal work-outs available for distressed companies in your jurisdiction? If so, what are the advantages and disadvantages in comparison to formal proceedings?

The debtor may approve a restructuring plan in order to reinstate a balanced financial situation with regard to its accounts and restructure its indebtedness in order to continue to trade (no liquidation plans are admissible).

The plan may provide an agreement with some creditors or third parties (eg, moratoria, rescheduling and/or partial waiver of debts, new loans or sales of assets) or internal measures to regain the business’s efficiency.

The plan should include a business plan and cash-flow analysis in order to show that its indebtedness is sustainable.

Plans need not be approved by directors. However, the feasibility of the plan must be certified by an independent expert appointed by the debtor.

Actions, payments and guarantees provided for in the plan are exempted from the avoiding powers of the receiver in case of subsequent bankruptcy liquidation. The directors may also be protected against civil and criminal liability if the plan fails.

No court approval or scrutiny is required. Further, the plan need not be disclosed or published and thus can be kept confidential. This is the main advantage compared to formal proceedings. Disadvantages include that restructuring plans are not protected from creditors’ enforcement actions, and in case of subsequent bankruptcy, the court may deny protection if the plan is found to be clearly defective.

Transaction avoidance

Setting aside transactions

What rules and procedures govern the setting aside of an insolvent company’s transactions? Who can challenge eligible transactions?

Insolvency procedures

Transactions performed before the commencement of an insolvency procedure (whether a liquidation or restructuring procedure) affect the estate only if the required formalities with regard to third parties or creditors generally have been completed.

Only the receiver can object that a transaction should be disregarded on these grounds.

Bankruptcy liquidation, extraordinary administration and administrative liquidation In insolvency liquidation procedures, transactions and payments can be set aside if they occurred two years before the procedure (depending on the circumstances).

Transactions unenforceable by operation of law The lookback period is two years for:

  • all transactions without consideration; and
  • payments of debts made in advance, when falling due on the day of the declaration of bankruptcy or thereafter.

Transactions unenforceable on receiver’s request In order to set aside a transaction, the receiver must bring a lawsuit within three years of the start of the procedure or five years of the date on which the transaction occurred with respect to:

  • transactions whose value to the debtor is 25% lower than the value of the consideration received by or promised to the debtor (one-year lookback period);
  • payments for debts that are due and payable and not made in cash or by other normal means of payment (one-year lookback period);
  • guarantees granted for pre-existing debts not yet overdue (one-year lookback period); and
  • guarantees granted for pre-existing overdue debts (six-month lookback period).

Any other transaction (ie, the payment of debts due and payable made in cash or by other normal means of payment, guarantees granted at the same time as assuming an obligation and any other transaction for consideration) that occurred in the six months before the procedure can be set aside, if the receiver proves that the other party was aware that the debtor was insolvent at the time of the transaction.

Moreover, the receiver can set aside disposals of assets by the debtor, using (within five years of the transaction) the same action which was available to individual creditors before the insolvency procedure. In this case, the receiver must prove that the transactions was detrimental to the creditors’ rights and, if the transaction was for consideration, that the third party was aware of such detriment.

Certain transactions are exempt and cannot be set aside, including:

  • payments for goods or services made in the ordinary course of business and in accordance with market practice;
  • payments of salaries or fees to the debtor’s employees and consultants;
  • sales at fair value of property intended as the main residence of the purchaser or his or her family, or as the main place of business of the purchaser;
  • transactions, payments and guarantees according to a restructuring plan, a debt restructuring agreement or a composition with creditors;
  • acts carried out in the ordinary course of business after publication in the companies’ register of the filing (or pre-filing) for admission to a composition with creditors; and
  • payment of services necessary to access to an insolvency procedure.

Compositions with creditors In general, no clawback actions are available in restructuring procedures. The only exception is for mortgages registered by creditors based on a payment order (90-day lookback period).

Operating during insolvency

Criteria

Under what circumstances can a company continue to conduct business during an insolvency procedure?

Debt restructuring agreements

There is no limitation on the debtor’s powers to manage the business when filing for a confirmation of the agreement.

Compositions with creditors After a filing (or pre-filing), the debtor can continue to trade in the ordinary course of business under the supervision of the court and a court-appointed judicial commissioner. The relevant debts must be paid in full under the composition with creditors proposal and will have super-priority in case of bankruptcy liquidation.

Bankruptcy liquidation and administrative liquidation  The debtor cannot continue to conduct business. Only the receiver can continue temporarily or partially operation of the business, with a view to sell the business as a going concern (in full or in part), if favourable to creditors.

Extraordinary administration The debtor can continue to trade in the ordinary course of business in the preliminary phase of the procedure, which should last two months, at which point the court will open the procedure.

Once the procedure has been opened, the debtor is replaced by the receiver, who will conduct the business until it can be sold. This must occur within one year (or two years if a delay is granted by the court).

Stakeholder and court involvement

To what extent are relevant stakeholders (eg, creditors, directors, shareholders) and the courts involved in any business conducted during an insolvency procedure?

Debt restructuring agreements

N/A.

Compositions with creditors The court (or judge) can authorise the debtor to perform any acts exceeding the ordinary course of business, including:

  • new loans in the best interest of the creditors; and
  • payment of pre-petition creditors necessary in order to preserve the business as a going concern.

Bankruptcy liquidation The court can authorise the temporary operation of business and can at any time decide to stop it where appropriate to avoid damage to the creditors.

Extraordinary administration In the preliminary phase, the court can authorise the debtor to perform any acts exceeding the ordinary course of business.

Once the procedure has been opened, the receiver conducts the business according to the government’s directions. The court can order conversion into bankruptcy liquidation (thereby ceasing operation of the business) if there are no sales prospects.

Financing

Can an insolvent company obtain further credit or take out additional secured loans during an insolvency procedure?

Compositions with creditors

The court can authorise the debtor to borrow new money if the loans are necessary to maximise the value of the assets or if they are urgent in order to preserve the business as a going concern.

The right of repayment of new loans:

  • enjoys a super-priority in the following composition or bankruptcy (if the loans are made by the shareholders, super-priority is limited to 80% of the loan); and
  • can be guaranteed by the debtor with a mortgage or pledge on its own assets.

Bankruptcy liquidation and administrative liquidation Borrowing is not considered admissible in purely liquidation procedures.

Extraordinary administration The commissioner can be authorised to borrow new money necessary to continue to conduct the business. Credit lines can be guaranteed by the state.

Employees

Effect of insolvency on employees

How does a company’s insolvency affect employees and the company’s legal obligations to employees?

Debt restructuring agreements

The filing does not affect contracts with employees and their claims.

Compositions with creditors Contracts with employees are not affected, as termination requests cannot be made to the court. The debtor can terminate employment contracts according to ordinary rules.

Employee claims arising before filing (or pre-filing) are dealt with in the composition with creditors’ proposal and only in rare circumstances can be paid less than the full amount.

The Social Security Agency will advance severance indemnity and employees’ salary for the past three months.

Bankruptcy liquidation and administrative liquidation Liquidation procedures do not affect contracts with employees, which continue with the receiver. The receiver normally terminates employment contracts according to ordinary rules.

Employee claims arising before the declaration of bankruptcy enjoy the highest degree of priority (after costs of the procedure and other super-priority claims).

The Social Security Agency will advance severance indemnity and employees’ salary for the past three months.

Extraordinary administration The purpose of this procedure is to preserve the business and employment contracts. The purchaser of the business must undertake to continue to trade and keep employment levels for at least two years.

Cross-border insolvency

Recognition of foreign proceedings

Under what circumstances will the courts in your jurisdiction recognise the validity of foreign insolvency proceedings?

EU Regulation 1346/2000 (and the new EU Regulation 2015/848) provides for EU-wide effects of main insolvency proceedings opened in any member states (where the debtor’s main interests are located), while secondary procedures can be opened in another member state (where the debtor has an establishment) according to domestic rules.

Non-EU insolvency proceedings can be recognised in Italy without any formality. A court order is required only in case:

  • an objection is raised that conditions required by Italian law for recognition are not met; or
  • an enforcement procedure (eg, the expropriation or seizure or apprehension of assets) is required, based on the foreign judgment or order.

Winding up foreign companies

What is the extent of the courts’ powers to order the winding up of foreign companies doing business in your jurisdiction?

The Italian courts can declare bankruptcy (or another insolvency procedure) of a foreign company (including EU companies) which has its main interests in Italy.

Centre of main interests

How is the centre of main interests determined in your jurisdiction?

The Supreme Court’s approach is in line with that introduced by the European Court of Justice in Interedil – in particular, the presumption that the centre of main interest is located at the company’s registered office can be rebutted when it is apparent to third parties that decisions regarding the administration and control of the company are being made in another member state.

Cross-border cooperation

What is the general approach of the courts in your jurisdiction to cooperating with foreign courts in managing cross-border insolvencies?

Italian courts are considered quite cooperative.